In Bid to Curtail 180-day Exclusivity, FDA Alters Longstanding Practice and Newly Declares that Converted OTC Products Are Not “Listed Drugs”

Readers of this blog surely are familiar with FDA’s repeated efforts to rein in Congress’s 180-day exclusivity reward to the first generic applicant that challenges an NDA holder’s patent monopoly (most recently by lobbying Congress to effectively end 180-day exclusivity together – see our prior post here).  We recently learned of another behind-the-scenes effort to do so—this time in the context of over-the-counter (“OTC”) conversions.

By way of background, FDA’s longstanding regulations “fulfill[] the statutory requirements for patent listing,” 80 Fed. Reg. 6,802, 6,823, by compelling NDA holders to submit patent information for any supplement that seeks “[t]o change [a] drug product from prescription use to over-the-counter use.”  21 C.F.R. § 314.53(d)(2)(i).  And both the statute and FDA’s implementing regulations in turn make clear that any generic applicant who wishes to reference such a product “must” submit “[a]n appropriate patent certification or statement” to each patent that has submitted by the NDA holder for listing in the Orange Book.  21 U.S.C. § 355(j)(2)(A)(vii); 21 C.F.R. § 314.94(a)(12).

Given the interplay between these two requirements, one might think that submitting a Paragraph IV certification to a patent the NDA holder submitted for a converted OTC product can ground 180-day exclusivity.  After all, such exclusivity attaches to every first-filed ANDA that “contains and lawfully maintains a certification described in paragraph (2)(A)(vii)(IV) for the [referenced] drug.”  21 U.S.C. § 355(j)(5)(B)(iv)(II)(bb).  And regardless of whether the referenced NDA for which the underlying patent was submitted is available OTC or only with a doctor’s prescription, the submission of any Paragraph IV certification entails the very risk that 180-day exclusivity is designed to compensate—namely, that it constitutes an artificial act of patent infringement which immediately subjects to the ANDA to the risk of costly patent litigation.  35 U.S.C. § 271(a)(2); see also Teva Pharms. USA, Inc. v. Sebelius, 595 F.3d 1303, 1318 (D.C. Cir. 2010) (“[180-day exclusivity] deliberately sacrifices the benefits of full generic competition at the first chance allowed by the brand manufacturer’s patents, in favor of the benefits of earlier generic competition, brought about by the promise of a reward for generics that stick out their necks (at the potential cost of a patent infringement suit) by claiming that patent law does not extend the brand maker’s monopoly as long as the brand maker has asserted.”).

Not so fast.  In an internal and previously undisclosed memorandum that this blog recently obtained under the Freedom of Information Act, FDA appears to have determined that such a Paragraph IV certification “does not create a new period of 180-day exclusivity” because “a full switch through approval of a supplement to an NDA does not create a new ‘listed drug’”—even though OTC conversion admittedly requires the elimination of a listing from the Orange Book’s Prescription Drug List and the addition of a new listing to the Orange Book’s OTC Drug Product List.

Though the Agency’s memorandum provides little interpretive justification for this new approach, it appears to be based entirely on a superficial change in administrative practice.  Until this internal memorandum was finalized, FDA’s traditional response to OTC conversion was to “remove[] the prescription listing and product number (e.g., “Product Number: 001”) from the Orange Book and create[] a new entry and new product number (e.g., “Product Number: 002”) in the OTC section, giving the new product number the approval date of the supplement for the switch.”  In order to effectuate its new anti-exclusivity policy, however, the memorandum explains that FDA now intends to “creat[e] a new entry in the OTC section but retain the product number from the prescription section (i.e., “Product Number: 001”). FDA will not describe the new entry as “Product Number: 002,” in the OTC section, which is a change from the administrative practice described above.”

We will leave it to you to decide whether Congress truly intended the incentive for challenging competition-blocking patents to hinge on whether FDA’s Orange Book staff labels a drug “Product Number: 001” or “Product Number: 002” when it deletes a previously approved drug from the Orange Book’s Prescription Drug Product List and lists a newly approved supplement in the Orange Book’s OTC Drug Product List for the first time.  As a policy matter, however, the consequences of FDA’s previously undisclosed change are clear: It allows NDA holders to effectively gut the 180-day exclusivity incentive by effectuating an OTC switch after receiving a first applicant’s Paragraph IV certification.  For applicants who certify to a listed patent when the product is prescription-only, OTC conversion renders 180-day exclusivity illusory because the product no longer can be marketed lawfully following the OTC switch.  See, e.g., Breckenridge Pharms., Inc. v. FDA, 754 Fed. Appx. 1, 3 (D.C. Cir. 2018) (citing 21 U.S.C. § 353(b)(4)(B) for the proposition that a drug approved for OTC use is “misbranded if it displays an ‘Rx only’ symbol”).  And by refusing to recognize 180-day exclusivity based on a Paragraph IV certification to the newly listed OTC product, FDA’s new position eliminates the statutory incentive to challenge the newly listed OTC product’s patents at the first available opportunity, since it allows FDA to approve subsequent applicants at any time.

That outcome hardly seems consistent with the oft-repeated principle that NDA holders cannot unilaterally undermine the incentives for challenging their patents.  See, e.g., Teva, 595 F.3d at 1317-18; see also Apotex, Inc. v. Sebelius, 384 Fed. Appx. 4 (D.C. Cir. 2010), aff’g 700 F. Supp. 2d 138 (D.D.C. 2010); Ranbaxy Labs. Ltd. v. Leavitt, 469 F.3d 120, 121-22 (D.C. Cir. 2006).  It is, however, entirely consistent with FDA’s longstanding efforts to do so.